The Effects of Attribute Evaluability and Evaluation Mode on Decisions Involving Nontraditional and Nonfinancial Accounting Information

58 Pages Posted: 18 Aug 2010 Last revised: 2 Dec 2010

See all articles by Hank C. Alewine

Hank C. Alewine

University of Alabama in Huntsville - College of Business Administration

Dan N. Stone

University of Kentucky - Von Allmen School of Accountancy

Date Written: November 4, 2010

Abstract

This study investigates how the presentation of nontraditional and nonfinancial accounting information interacts with supplemental evaluability information (EI) to influence management decisions. The evaluability hypothesis (Hsee 1996) states that difficult-to-evaluate data are weighted more when analyzing alternatives jointly (called joint evaluation mode, or JE) than separately (SE). In Study One (n = 119), participants were randomly assigned to an evaluation mode (EM) condition, i.e. either JE or SE, with either none or complete EI in a 2X2 factorial design. Participants evaluated two equally important environmental accounting metrics for two factories and indicated how much they would invest in each; one factory was superior to the other. EM and EI interacted to influence accuracy; participants invested more in the superior than the inferior factory in JE than SE mode with no EI; with complete EI, there was no difference in the accuracy of investments across EM. In Study Two (n = 53), EM was again manipulated (JE, SE) while EI was only available for one of the two metrics; the two factories were equally attractive. EM influenced investments; alternatives favored by the metric containing EI were rated higher in SE mode, while alternatives favored by the metric without EI were rated higher in JE mode. These results suggest the importance of cost accountants and system designers carefully considering EM and EI influences when presenting varying levels of evaluable accounting information that is nontraditional and nonfinancial for decision making – such as investments that include environmental considerations.

Keywords: Management Decision Making, Environmental Accounting, Evaluability Hypothesis, Attribute Evaluability, Evaluation Mode

JEL Classification: M40, M46

Suggested Citation

Alewine, Hank C. and Stone, Dan N., The Effects of Attribute Evaluability and Evaluation Mode on Decisions Involving Nontraditional and Nonfinancial Accounting Information (November 4, 2010). AAA 2011 Management Accounting Section (MAS) Meeting Paper, Available at SSRN: https://ssrn.com/abstract=1660203 or http://dx.doi.org/10.2139/ssrn.1660203

Hank C. Alewine (Contact Author)

University of Alabama in Huntsville - College of Business Administration ( email )

Huntsville, AL 35899
United States

Dan N. Stone

University of Kentucky - Von Allmen School of Accountancy ( email )

Lexington, KY 40506
United States
859-257-3043 (Phone)
859-257-3654 (Fax)

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